Merger of Fannie, Freddie's bond units proposed

WASHINGTON (AP) - The federal regulator who oversees Fannie Mae and Freddie Mac is putting forward a plan to combine the two mortgage giants' divisions that issuing billions of dollars in securities backed by home loans.

The plan announced Monday by Edward DeMarco, acting director of the Federal Housing Finance Agency, is part of efforts to overhaul Fannie and Freddie with the goal of shrinking the government's role in the mortgage finance system. The government rescued the companies in 2008 with $170 billion in aid, the costliest bailout of the financial crisis.

DeMarco said the new entity, separate from Fannie and Freddie, could eventually be sold or used as the foundation for a restructured mortgage market.

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